Labor head: VW has potential to beat savings goal

Christoph Rauwald
Bloomberg News

Volkswagen AG, Europe’s biggest automaker, could beat its namesake passenger-car unit’s 5 billion-euro ($5.66 billion) target for boosting profit, the manufacturer’s top labor representative said.

VW’s product-development processes can become still more efficient even as measures initiated last year are progressing well, Bernd Osterloh, head of the company’s works council, told reporters near Volkswagen headquarters in Wolfsburg, Germany.

“We should be able to save significantly more than targeted” through such moves as intensifying a cutback in the variety of vehicle components, Osterloh said.

Volkswagen, which also makes Audi and Porsche luxury autos and MAN and Scania trucks, has a group target of overtaking global auto-industry leader Toyota Motor Corp. in deliveries by 2018. After years of emphasizing sales growth, Chief Executive Officer Martin Winterkorn has shifted Volkswagen’s focus to boosting earnings power.

Winterkorn set the target last year for the VW nameplate to bolster profit by 5 billion euros by 2017. The goal also includes operating profit almost tripling to at least 6 percent of revenue by 2018 from a 2.3 percent margin in the first nine months of 2014.

VW carmaking workers submitted more than 500 ideas last year to improve efficiency, and the sales operation followed up with another 800 suggestions, said Osterloh, who also sits on the German company’s supervisory board.

Parts cutbacks

Reducing the range of parts used in VW vehicles such as the Golf and Polo hatchbacks will offer “significant savings potential,” Chief Financial Officer Hans Dieter Poetsch said in a presentation earlier this month.

Volkswagen’s group deliveries exceeded 10 million vehicles in 2014, beating the milestone four years earlier than targeted.

Restoring profitability at the passenger-car unit, the largest division by volume, is part of a push to become more cost competitive and better offset volatile car markets. Shrinking demand in Russia and the falling ruble are weighing on VW earnings by “a three-digit million-euro” sum, Osterloh said.

The earnings-improvement effort includes capping spending increases and increasing revenue while investing about 17 billion euros a year on average through 2019 across the group on new vehicles, technology and factory expansion.

Osterloh dismissed a report by Manager Magazin a week ago that said VW’s new holding company for heavy-truck operations will set up its headquarters in Frankfurt. It would make “no sense” for the division to be based somewhere that has no ties to other parts of VW group, he said.

Renschler’s role

Andreas Renschler, a former Daimler AG executive who will take over as VW’s new truck chief next week, is set to draft a strategy to challenge his former employer as global commercial- vehicle market leader. Renschler will need to examine whether acquisitions are necessary, Osterloh said.

“Focusing on Europe and Brazil won’t be enough if the goal is to be a global player,” Osterloh said. “We’ll have to talk about the U.S. market and about China as well.”

Speculation that Volkswagen may buy Paccar Inc. to expand in North America isn’t realistic at the moment because a price of about $18 billion “is a joke” and the Bellevue, Washington- based truckmaker’s owners aren’t willing to sell anyway, Osterloh said. VW would be forced to dispose of Paccar’s DAF unit in Europe to avoid antitrust issues, he said.